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Demand for palm oil from India and China is expected to rise in the coming months, as recent price corrections offer an attractive entry point for the two major importing nations, an industry expert said on Tuesday.
Malaysian palm oil prices had climbed about 20% over the past year, but have shed roughly 12% since the start of this year, as the crop lost competitiveness against rival oils such as soybean oil.
Julian McGill, chief executive of consultancy Glenauk Economics, told a palm oil forum in Jakarta:
"We feel that in the near term, these markets will come back. We're seeing intensive buying from India and China."
He added:
"We're not worried about stock build-up over the coming year."
He noted that Indian importers, who had scaled back palm oil purchases since December, have returned to the market in force for June to August shipments, with the tropical oil currently trading at a discount to competing oils.
He also said actual palm oil importers in China are buying actively for June-to-August delivery.
"Chinese buyers may end up stockpiling large volumes, since their inventory levels are relatively low," he said.
He forecast that this demand would help keep palm oil prices in a range of 3,900 to 4,200 ringgit per tonne over the next six months.
The benchmark palm oil contract on Bursa Malaysia Derivatives closed on Tuesday at 3,864 ringgit a tonne.
McGill added that the sustainability of this demand would continue to hinge on palm oil's ability to maintain its price advantage over rival oils, with export volumes expected to peak in August.
Source: Reuters